Your Rights and Obligations Governing Documents Give Answers

Your Rights and Obligations

Your roof terrace leaked and the neighbor below you sued for damages. Do you have any recourse? The heating system in your apartment failed to work and the managing agent sent you the bill for its repair. Do you have to pay? You bought a dog for your child, and six months later the board has demanded that it be removed from the building. Do you have to comply?

The answers to most questions raised by co-op and condo residents are contained in the governing documents of the corporation or, in the case of a condo, the unincorporated association. These documents which include the proprietary lease, the bylaws and the house rules are generally filed away for safekeeping in your attorney’s office. Or, perhaps you have a copy that you keep with your other important papers. Whatever the arrangement, these documents should be read (and periodically re-read) by every co-op and condo owner because their contents govern the terms of your ownership as well as your rights and obligations.

A Hierarchy of Documents

To make some sense of the maze of rules, laws, doctrines and codes that affect ownership of shares and property in co-ops and condos, it is important to view these documents in some sort of hierarchical order. At the top, in a co-op, is the certificate of incorporation filed with the Department of State as required by Section 402 of the Business Corporation Law of New York State. The equivalent, for condos, is the declaration of the condominium required by Article 9B of the Real Property Law of the State of New York, commonly referred to as the Condominium Act. These documents may contain specific provisions for making amendments. A copy of this document may be obtained from the Secretary of State, Department of State, Division of Corporations in Albany if it is not available in the corporate files.

Next in the hierarchy are the bylaws of the co-op corporation or condo association. The bylaws form the basis for conducting business within the organization, and this document generally details the purpose of the entity; its form of government; the method of elections; the voting process; the type and frequency of meetings of directors, shareholders or owners; the specific form of agenda for the meeting(s); a description of the directors and the number of officers along with a description of their duties, responsibilities and liabilities.

Also included in the bylaws is the manner in which directors may change, both in number and by replacement or removal. One of the most important features of many bylaws is that they contain specific guidelines for amending their contents. The bylaws of a condo contain other significant provisions having to do with the form of ownership and method for changing it, a description of the property, the operation of the property and the duties and responsibilities of the owners and occupants of the condo.

Since condo owners possess real property rather than shares in a corporation, there is no proprietary lease as in a co-op. Therefore, condo bylaws are multi-faceted documents that are difficult to ignore. Most condo bylaws contain special provisions relating to the sale and rental of units and the approvals or waivers required in order to allow clean transfer of title. Failure to adhere to these requirements may result in the transaction being voided under law. For this reason owners, members of the board and managing agents alike pay particular attention to the specifics in condo bylaws.

At co-ops and condos alike, the bylaws afford you the most important vehicle for exercising your rights to make changes or reinforce your specific needs. They provide you with your right to vote and the manner in which you vote. The bylaws also define who may or may not be a director, officer resident or owner and may allow you to implement new organizational and management policies.

Any change to the bylaws should be prepared by an attorney, presented to the shareholders or owners in the specific manner and form specified; and, if so changed, should be filed with the Attorney General of the State of New York as an amendment to the plan so it is formally part of the public record.

The Proprietary Lease

Next in the hierarchy of governing documents but one that only pertains to co-ops, is the proprietary lease. Granted by the corporation when the shareholder purchases shares of the corporation, the lease forms the basis of the rights and responsibilities of the shareholder and the co-op corporation. It is the most important document in terms of the day-to-day relationship between the shareholder and the corporation. The shareholder is responsible for paying rent and is given the right to quiet enjoyment of the apartment. He is protected under the umbrella of a warrant of habitability (as defined by the courts).

In most cases, the proprietary lease clearly defines all the provisions related to the use of the apartment including occupancy, modification, repairs and a host of other significant provisions. By and large the condo’s bylaws and house rules provide the same provisions. In order to change the provisions of a co-op’s proprietary lease, it is necessary to refer back to the bylaws and the terms of the lease itself to determine exactly how these changes can be brought about.

Usually it will require consent of at least two thirds, or more, of the owners of record either with respect to the total number of shares, or in a condo, the percentage of common interest. The change itself should be drawn by an attorney, presented by resolution with the specific language to be changed to all owners, and, if approved according to the bylaws and/or proprietary lease requirements, filed by an attorney with the Attorney General’s office so it becomes part of the public record.

Defining Inappropriate Behavior

At the bottom of the hierarchy of governing documents, but certainly no less important, are the house rules. Almost always incorporated into the proprietary lease for the co-op or the bylaws of the condo, the house rules usually specify all the no provisions such as no storage of personal property in the hallway, no pets and no excessive noise. It is incumbent on the managing agent and the board to review the house rules and to update them as may be necessary. It is incumbent on all owners to take the time to review these rules periodically to avoid embarrassing situations or inconveniences.

House rules are usually drafted with language that has less of a constitutional flair than that used in bylaws or the proprietary lease. House rules generally deal with very specific living requirements in and about the building, and they tend to be associated with quality of life issues. As laws change–as has been the case with environmental requirements, lead paint and recycling, to name just three–the need for updating becomes more important. Under the terms of the bylaws and proprietary lease, the board of directors has the unilateral right to amend house rules without shareholder or owner approval. It would be prudent, however, to solicit comments from the ownership before imposing requirements, which may be both difficult to adhere to or enforce, and then to amend the house rules from time to time, perhaps once a year. Any change to the house rules need not be drafted by an attorney, but should be distributed to all present and future owners, a step often missed when a new buyer acquires an apartment. The transfer agent, secretary of the organization or managing agent should assure that the proprietary lease or the bylaws contain the most recent set of house rules for the new owner.

A Wealth of Knowledge

Even if you are already knowledgeable about your co-op or condo’s governing documents, you may want to revisit them every few years. If you are becoming informed for the first time, start with the offering plan which contains the proprietary lease, bylaws and house rules. Read them cover to cover. Contact your managing agent or the organization’s attorney to assure that you have all the amendments that have been filed. The entire effort may only take a few hours, but the result will be a wealth of knowledge. It is your right to be informed, and to be able to make decisions based on this knowledge. It may also save you time and money in the future.

Mr. Cohen is president of A. Michael Tyler Realty Corp., a residential property management firm based in Manhattan.

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11 Comments

  • we are a nassau county co-op - we recently had a vote to initiate a transfer tax - question:are shareholders who did not vote & did not submit a proxy permitted to vote subsequent to the general shareholder vote that took place at the annual meeting?
  • i would love to know the rights and obligations of an property owner
  • when the condo documents ie. declarationd and by- laws specify a specific date for an annual meeting of owners, what is the effect of holding the meeting at a different date. when no legal holiday is involved?
  • The management of my co-op distributed a price list of repairs that the super would do in the apartment. Sometime thereafter I had a leak caused by a faulty faucet stem well within the wall, which resulted in water damage to the apartment below. My co-op says I'm responsible even though the proprietary lease says I'm not because it was within the wall. They cite the repair list sent to shareholders as a change in the proprietary lease, but there was no mention of it at the time and the price list made no mention of it either. Is this proper procedure to change the proprietary lease on such an important issue?
  • Mark B. Levine, RAM (mblevine@ebmg.com) on Wednesday, August 10, 2011 4:41 PM
    @Lawrence, Your Properietary Lease probably has language that states a supermajority of Shareholders mus approve any change to the Prop Lease. The Board does not have the authority to overturn the rules set forth in the Prop Lease on their own. You might want to see what procedure was used to facilitate a change in the Prop Lease before your question can be answered.
  • i have inherited shares in a co-op in nassau county NY and have been given a properly executed proprietary lease. Can a co-op board have other demands before I can inhabit the apartment the shares refer to?
  • Can a coop BOD hold Board meetings (not executive sessions) and exclude shareholders? Can a BOD refuse to tell cooperators at the Annual meeting why a shareholder proposal was rejected by the Board? Is it within the rights of the BOD to suspend the provision in the by-laws to report the proceedings of the meetings (not annual meeting) to the shareholders via a public posting of the minutes?
  • Co-op building: 70% owned by sponsor. Leak inside wall caused damage to renters bathroom. Leak was fixed by co-op. who is responsible to replace tiles and plaster, etc. renter's apt.?
  • My co-op Board is forcing us to replace our original steel casement windows and pay for them, even though our Prop Lease states the co-op is responsible for the windows. What can we do?
  • Pipe replacement in next door unit necessitated opening walls in our apartment bedroom and closet. Our small closet is now 2 inches smaller and one wall is useless for storage. We have to buy new storage units. Who is responsible. We were given NO advance warning that this would happen as a result of the pipe replacement for the unit next door.
  • Nassau County...all financials perfect, called us for an interview, set date and time 1 week before interview, sent picture /drivers license a couple of days after call. Morning of interview, denied application and cancelled interview with no reason. No interaction in between. Great references, clean records, very professional and well spoken applicants. Our application was sent out as if it was sent to Bill Gates! Now Out 3k with no reason and board did not return our bank, our lawyer, sellers bank lawyer nor realtors call (they all called on their own). I think once they opened and saw our color, they made their own assumption and put us in the wrong category. I hate to pull the race card, but the morning of they send us a cancellation after a week of calling us for an interview - because that's appropriate and professional. Very disappointing and frustrating.